Exchanges with international sustainability experts

We consider it especially important to meet and exchange views with sustainability experts from different fields. Since 2005, we have been inviting experts from various parts of the world to collaborate with Henkel in further developing our strategy. We choose these experts on the basis of their knowledge of the challenges their countries face and their experience in corporate sustainability management. Overall, the expert dialogue helps us to adjust our alignment to sustainable development and social responsibility to reflect external expectations in the different regions, and to find the right answers – especially when it comes to developing appropriate solutions at the local level.

For the 2004 and 2005 Sustainability Reports, we asked experts from Brazil, China, Germany, Hungary, India, Italy, Mexico, Russia, and the USA to describe the challenges and priorities they see in their countries and regions. In 2007, we continued the regional dialogue with expert Dr. Allen White of the Tellus Institute in Boston, Massachusetts, USA. At our sustainability press conference in Düsseldorf in March 2007, Dr. White and Brad Caspar, President and Chief Executive Officer of our subsidiary The Dial Corporation, discussed current developments in the USA in the field of sustainability. In 2008, we invited John Elkington, founder and Chief Entrepreneur of the SustainAbility Agency, London, UK, to a workshop at our headquarters in Düsseldorf. In the context of his presentation, John Elkington described to Henkel sustainability experts the current challenges associated with the topic of sustainability. The panel also discussed risks and opportunities associated with intensified marketing communication of sustainability activities on brand and product level. In 2009, top managers from Henkel in Vienna, Austria, participated in a number of talks with scientists and economic experts. These discussions centered on the topic of establishing trust and security in economically difficult times. In a workshop held in December 2010, the company's new strategic alignment for sustainability was discussed with an international circle of experts.

In developing our new sustainability strategy, we pursued our existing dialogue with five selected experts from Germany, Switzerland, the USA and India. At the end of 2010, these specialists met with members of the Henkel Sustainability Council in a workshop held at our headquarters in Düsseldorf to discuss current trends in sustainable development, to evaluate their impact on business and our markets, and to identify concrete options for action. This strategy mind-map documents the results of the workshop.

Results of Expert Dialogue

Collectively, the experts' contributions present a balanced picture of the key issues in emerging economies and industrialized countries. It is clear that, while many of the challenges of sustainable development are similar everywhere, priorities and perspectives differ widely from region to region. Emerging economies, in particular, expect multinationals to contribute to the development of their countries. In industrialized countries, in contrast, maintaining competitiveness is increasingly becoming a key challenge. The table presents the results of our dialogue with the experts in condensed form and gives concrete examples of the varied expectations.

Based on the results of the dialogue, we have developed our Sustainability Reporting still further. The new reporting structure directly reflects the key areas identified in the dialogue and indicates the company's responses to the different regional and global challenges. This approach is intended to emphasize how seriously we take our corporate responsibilities and contribute to sustainable development.

Key Areas

Expectations in Industrialized Countries

Expectations in Emerging Economies

Economic Development

Remain competitive and offer development opportunities to emerging economies

Contribute to the country’s development, especially in structurally weak regions

Values and Management

Promote the adoption of environmental and social standards, throughout the value chain, especially among suppliers

The above table presents a summary of the results of the expert dialogue and offers specific examples of the regionally differing expectations.

Prof. Dr. Marco Frey | Centre for Research on Energy

Italian consumers are paying more and more attention to environmental issues and to product safety. But only a minority is willing to pay more for environmentally friendly products at this point. However, Henkel’s citizenship responsibilities provide the potential to differentiate itself and enhance its reputation. In Italy these entail in particular:

Ensuring the potential for continued value creation in Italy while creating development opportunities for emerging economies,

Addressing potential human rights abuses in developing countries, and

Contributing to solutions for social problems, such as demographic change, defense of diversity, and employment stability.

These responsibilities have to be translated into local activities. From an Italian perspective two factors appear to be particularly important:

Involving the employees in the definition of the necessary measures and enabling them to participate in activities to solve social problems in their communities, and

Solving problems through voluntary commitments and NGO partnerships, especially where common areas of interest can be defined.

All participants in the economy have to integrate sustainable development into their strategy as well as into their behavior in order to achieve this goal.

Since environmental problems cannot be solved without keeping economic progress in mind, industry’s resource and energy requirements need to be harmonized with the interests of environmental protection.

In recent years the human aspects of sustainable development have received increasing attention: the way and quality of life, consciousness, preservation of values, traditions, and health. Furthermore, maintenance of employment, as well as the respect for human rights and the democratic institutions are also important for sustainable development.

For Hungary the creation of jobs and the development of environmentally friendly industrial activity in the less developed regions are of particular relevance.

Without radical and definitive change of the present practices, economic development cannot be maintained for much longer. However, we can achieve the positive changes only over a longer transition period, and we have to accept a stepwise incremental progress, as long as the direction is right.

The process of transition into the sustainable stage of economy will certainly take some decades in Hungary – and will be directed and organized by the students of today. Therefore, all those who want to positively contribute to this process should support education at the school and university level, and research into environmentally friendly products and lifestyles for future generations.

After all, it is the thinking and behavior of people, as well as the development of their knowledge, that can make the most important difference in creating a sustainable society.

During the last two decades, China has experienced rapid economic growth and dramatic industrialization and urbanization. This has involved the massive use of limited resources and resulted in serious environmental damage. Due to three major challenges – the large population, shortage of resources and environmental pollution – pursuing economically, socially and environmentally sustainable development is the only solution.

Henkel’s direct investments in China strengthen the local capital market, bring advanced production technology, and provide high quality products, as well as creating employment opportunities at its facilities.

As a multinational corporation operating in China, Henkel could contribute to local sustainable development while fulfilling its corporate social responsibilities by:

Operating efficient and safe production facilities and extending the concept of a circular economy from its plants to the lifecycle of its products and by-products,

Developing safe and environmentally friendly products and using its products as well as its communication to increase public awareness of sustainability practices,

Continuously training its employees in environmentally friendly and safe production and educating the youth about sustainable development,

Sharing information on Henkel’s environmentally friendly practices with its suppliers and customers, demonstrating the benefits of eco-efficiency – especially to local small and medium sized companies (SMEs) – and disseminating knowledge about sustainable business strategies,

Cooperating with all stakeholders and partners to combat major problems such as poverty, global warming, decreasing bio-diversity, and ozone depletion.

Mexico today is undergoing an in-depth transition: Its economy is rapidly opening to the world and receiving large amounts of foreign direct investments. Mexico has made clear progress in environmental matters, though it is still necessary to fine tune the regulatory framework. Furthermore, Central and Northern Mexico urgently need to use their scarce water resources more rationally. However, several very serious social problems threaten Mexico: uncertainty in terms of public safety, unemployment, and the lack of a political consensus on the nation’s most important political reforms.

For its part, Henkel can make a very significant contribution to resolving these challenges, meeting Mexico’s diverse social and economic needs through its activities:

Contributing to innovation, transferring knowledge and technology in safe, environmentally friendly products, and making better use of non-renewable resources.

Offering employees fair and safe working conditions, improving their quality of life, and contributing to the development of human capital.

Continuing with the business ethic that has characterized the company, respecting human rights and having a positive impact, through example, on the communities in which the company is located.

Creating value and reinforcing the reputation of the company around the world, while stimulating growth in its communities, acting not just as an inhabitant but as a citizen of these communities.

Improving the environmental performance of its products throughout their life cycle, promoting integrated solutions and the rational use of non-renewable resources.

Dr. Allen White | Vice President and Member of the Board of Directors, Tellus Institute, Boston, Massachusetts, USA

Trust takes years to build, but only a mistake or two to lose. This is especially true for companies with strong lines of personal and home care products, a business where competition is intense, alternatives are plentiful, and reputation is central to customer loyalty.

In the coming decade, such companies will be affected by a number of key issues that are prominent in the U.S. business context:

Transparency: Expectations and mandates with respect to non-financial information will intensify, reaching well beyond environmental issues to encompass social, economic and governance aspects of the company.

Product safety: A perennial issue for the chemical and health products sectors, and one that historically has intensified in sudden and unexpected ways.

Job quality and security: Companies seriously committed to human capital development must “walk the talk” through training, livable wages, profit-sharing and other measures that concurrently support corporate responsibility and competitive advantage in terms of attracting, nurturing and retaining top talent.

Transforming business models from product to services: Service-oriented business models that substitute knowledge for physical inputs point the way toward dematerialising the production of both industrial and consumer products.

The United Nations Millennium Development Goals (MDG): Companies should be asked if what they produce – and how they produce – contributes to meeting these goals in both the domestic and global context.

Successful companies can exist only in successful and sustainable societies. Henkel´s products have the potential to transform local cultures by impacting life styles, aspirations and sustainability practices. Future success will depend on Henkel´s ability to innovate on products/services that make people’s lives easier, better and more beautiful, in a culturally sensitive and economically relevant fashion.

This translates into a number of strategic challenges, which are also Henkel´s biggest challenges:

To capitalize on the newly emerging opportunities at the bottom of the pyramid by serving over half a billion people, a vast majority of them with low purchasing power, with an innovative class of environmentally sound, low resource consuming products/services which are appreciative of local culture and social context.

To evaluate, in line with Henkel´s product stewardship efforts, the sociological, ecological and toxicological aspects of its business processes, products/services and raw materials over the global value chain – and to integrate social and environmental parameters in product development and marketing decisions.

To tailor and adapt Henkel´s business processes and practices to generate outcomes that are culturally inclusive and exceed community expectations as well as local standards in meeting environmental and social needs, by creating best-in-class practices adapted to Indian requirements and communicating with the relevant stakeholders.

To help build capacity and transfer technology by partnering and sharing best practices along the value chain in order to bootstrap the performance of suppliers and competitors – without compromising Henkel´s own competitive advantages.

Henrique B. Cavalcanti | President of FUNATURA, former Minister of Environment and the Amazon, Chairman of the 3rd Session, UN Commission on Sustainable Development

How to be a good citizen and an active participant in society: The main challenge for a multinational corporation operating abroad may well be to responsibly exercise its rights and fulfill its duties. As a good citizen, a corporation is expected to be sustainable, competitive and profitable, and to promote through its activities the social, economic and environmental advancement of society where it operates.

In exercising its corporate rights, Henkel should assert its leadership by overcoming difficulties due to institutional conditions, as related to the stage of development of the specific country, in a lawful and ethical manner. In Brazil, this would entail focusing on:

strengthening the local capital market;

setting high standards for suppliers of materials and services and reaching all income levels and regions with quality products.

In fulfilling its duties towards society, Henkel should develop a set of actions that contribute to the common good, while enhancing its corporate profile. For Brazil this could mean addressing.

consumer information about sustainable practices;

use of natural products and water savings in the production process;

support of the young, especially the urban underprivileged, through educational and sports initiatives;

and strict safety and security measures in the workplace, in transportation and in product use and disposal

Recognizing and utilizing social challenges as a motor for sustainable product innovations. Companies like Henkel will increasingly be judged by their European stakeholders in terms of their contribution to the achievement of global sustainability goals. We therefore see the following priorities:

The opportunities and risks of sustainable development should be routinely integrated into portfolio analysis and product development with the help of new assessment methods. This is essential for innovative products that will promote sustainable development in the markets while simultaneously securing long-term entrepreneurial success.

In emerging economies and developing countries, Henkel should seek to enter into new alliances with international organizations and public institutions, so that its goods and services can contribute to sustainable development in line with the United Nations’ Millennium Development Goals.

We view initiatives to encourage sustainable consumption in the markets of the European Union and other industrial nations as having great potential for raising the awareness of consumers and being successful with sustainable goods and services.

Given the globalized nature of value chains, Henkel has a duty to promote the adoption of high environmental and social standards by its suppliers, also with a view to optimizing the overall sustainability performance of its own products. Suppliers must therefore be systematically assessed, selected and qualified.

Accepting national challenges as a way to gaining public confidence. Paving its difficult way to democracy and market economy, Russia is meeting certain social and environmental challenges that harbor threats to the whole of Russian society. Foreign companies operating in Russia therefore face a number of key sustainability issues:

Poverty may be considered as the major challenge for Russian society. Companies should provide job security and ensure the well-being of their employees. A well-developed policy of corporate social responsibility targeted at the needy, and especially children, in the different Russian regions will gain public recognition.

There is a lack of investment in those sectors of the Russian economy that do not deal with the extraction of natural resources. The transfer of modern and energy-saving technologies to these sectors is vital.

The disparity in regional development is one of the most important challenges for Russia’s integrity. Appropriate geographical location of production facilities could provide a new impetus for balanced development in stagnating regions.

The fight against climate change will assume increasing importance in the coming decades. Positive trends in environmental protection should be secured by introducing advanced environmental management practices. Companies should focus on reducing carbon dioxide emissions through joint implementation projects.